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The West African country is looking to meet key development goals
Climate risks threaten to jeopardise Nigeria’s quest to achieve upper-middle-income status by 2050 and demand a suite of actions to ensure the resilience of the country’s people and their homes.
The Climate Policy Initiative’s (CPI) Landscape of Climate Finance in Nigeria 2024 report says that as one of Africa’s major economies and a growing greenhouse gas (GHG) emitter, Nigeria is at a critical juncture in its development pathway.
The report says investment decisions taken today will determine whether growth is sustainable and equitable for the rest of this century and beyond.
“In spite of recent macroeconomic turbulence – including record-high inflation and currency devaluation – the country is working toward the key development goals of energy access, adequate water, sanitation and hygiene services (WASH), quality housing and infrastructure, sustainable agriculture, and access to health and education.
“Indeed, infrastructure investment needs are estimated at $3 trillion up to 2050 while the Government’s Energy Transition Plan (ETP) is costed at $1.9 trillion up to 2060.”
However, spiralling climate risks across the country – notably flooding, sea-level rise and drought – threaten to jeopardise Nigeria’s quest to achieve upper-middle-income status by 2050.
In September, flooding in Nigeria’s northeast affected a reported million people – authorities said it was the worst flooding in the region for two decades.
The report says that pursuing low-emission, climate-resilient growth can offer a viable means of delivering on these development goals “while ensuring the resilience of Nigerian people, as well as the infrastructure and ecosystems upon which the country’s growth will depend.”
“To this end, the quantity and quality of climate finance will be key.”
The report says Nigerian climate finance witnessed incremental growth in 2021/22, the third-highest by total in Africa.
Climate finance gap in NIgeria
However, flows fall well short of estimated needs.
In 2021/22, $2.5 billion of public and private capital – from both domestic and international sources – went to climate action in Nigeria, up by 32% from $1.9bn in 2019/20.
Comparing flows to estimated needs, however, shows an annual climate finance gap of $27.2bn.
“Set in a broader context, and relative to opportunities for climate action, Nigeria’s $2.5bn in tracked climate finance is minimal.
“Representing less than 1% of national GDP, this amount was almost equivalent to the country’s spending on foreign debt servicing in 2021/22 ($2.3 billion).
“Moreover, climate finance flows were dwarfed by the $9.3bn spent on government fossil fuel subsidies in 2022 and the $6.7bn in estimated loss and damage resulting from devastating floods across the country in the same year.”
The report notes that public actors continued to provide most (70%) of Nigeria’s climate finance, though there was also relatively strong participation from corporations in 2021/22.
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Climate finance sources
Among public actors, multilateral development finance institutions (DFIs) were the largest providers ($1.2bn).
Private actors provided $0.8bn, or 30% of total climate finance (up from 23% of the total in 2019/20) with corporations accounting for over three-fifths of tracked private climate finance.
“This placed the corporate contribution in Nigeria substantially higher than their share across African private climate finance as a whole (34%).”
Similarly, private actors provided a greater share of Nigerian climate finance (30%) than the African average (18%).
Overall, tracked corporate climate investments in Nigeria were largely for small scale solar PV.
Mitigation investments remained dominant in Nigeria’s climate finance landscape, totalling $1.2bn, largely due to investment in solar PV.
Despite the relative dominance of energy mitigation finance, the energy access gap remains a critical challenge for Nigeria, which has high growth potential for decentralised off-grid solar energy solutions.
Other key mitigation opportunities include abating methane emissions by reducing gas flaring, which is widespread.
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In 2021/22 there was a significant uptick in low-carbon transport investments, while other key mitigation sectors – notably buildings, waste and industry – are being left behind, receiving little-to-no finance.
Adaptation ($0.74bn) accounted for less than one-third of Nigeria’s climate finance, covering only 6% of the country’s estimated adaptation finance needs, despite spiralling climate risks.
Half of Nigeria’s adaptation finance went to the Agriculture, Forestry and Other Land Use (AFOLU) and fisheries sector, the report points out.
Water and wastewater adaptation finance grew significantly in 2021/22, but remains minimal relative to the scale of water stress throughout the country.
Minimal-to-no adaptation finance was tracked for climate-resilient infrastructure for energy systems, buildings, transport, and industry.
Investment needed for climate mitigation and adaptation
Overall, the financing gap for addressing flood risk is a major feature of the Nigerian adaptation landscape.
Dual-benefit finance – simultaneously reducing emissions and building adaptive capacity – accounted for 20% of Nigerian climate finance ($497 million) in 2021/22, indicating efforts to ensure the effective use of scarce climate finance.
“Most dual-benefit finance was for the AFOLU and fisheries sector, given the scope for climate-smart agriculture and sustainable resource management.
“There are also untapped opportunities for integrating nature-based solutions into (rapidly growing) urban spaces, offering potential to deliver a wide array of social benefits for Nigerian people, including improved air quality.”
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The report says that international public climate finance to Nigeria, which accounts for the bulk of flows, was largely channeled as debt, both concessional (54%) and non-concessional (35%).
“Reliance on debt-based climate investment is cause for concern, given the country’s already substantial debt burden. The Nigerian government spends over 80% of its revenue on settling or servicing debt, with only 20% of the remaining revenue available for spending on vital social services and development priorities.”
The report shows that, despite some advancement since the last stocktake of Nigerian climate finance in 2019/20, progress has been uneven across sectors.
“It also falls well short of estimated needs, for both mitigation and adaptation.” |
